Why Kenya’s China loan repayments spark economic concerns

For more than a decade, China has been one of Kenya’s biggest financiers of infrastructure.

From highways to railways, Chinese loans helped build projects that promised to transform the country’s economy. But today, the story is changing.

Kenya is now facing growing pressure to repay billions of shillings to Chinese lenders, raising serious questions about the country’s financial future.

The shift is part of a broader change in China’s lending approach to Africa. For years, Beijing poured money into large infrastructure projects under the Belt and Road Initiative. Many African countries welcomed the loans because they came at a time when other lenders were hesitant to fund big projects.

Kenya was among the major beneficiaries. Chinese financing helped construct roads and the Standard Gauge Railway (SGR), one of the country’s most ambitious transport projects. The railway linking the port city of Mombasa to Nairobi was meant to boost trade, cut transport costs, and stimulate economic growth.

However, the financial reality is now becoming clearer as the loans mature.

Across Africa, financial flows have dramatically reversed. In the early 2010s, African countries were receiving huge amounts of Chinese credit. Today, many of those same countries are paying back large sums as repayment deadlines arrive. Instead of new money flowing into the continent, billions are now flowing out to service old debts.

Kenya is among the countries feeling the weight of this change.

The government borrowed about Ksh903 billion from Chinese lenders to build the SGR. At the time, officials believed the railway would generate enough income from passengers and cargo to cover its costs. The expectation was that the project would eventually pay for itself while also boosting the wider economy.

But the railway has struggled to generate the expected revenue.

Freight targets have often fallen short, and passenger income alone cannot cover the full cost of operations and loan repayments. As a result, the government has had to step in and cover the gap using public funds.

This has turned the railway from a symbol of development into a growing fiscal responsibility.

Debt burden

Kenya now spends roughly Ksh129 billion every year repaying Chinese loans tied largely to the SGR. In a national budget of about Ksh4.26 trillion, that is a significant amount of money. Every shilling directed to debt repayment is money that cannot be used for healthcare, education, or other development needs.

At the same time, another challenge is emerging.

China is no longer lending to Africa at the same pace as before. Over the past several years, Chinese banks have reduced new loans to African countries. Lending has dropped dramatically from its peak, reflecting Beijing’s growing caution about financing countries with rising debt levels.

This shift has serious implications for Kenya.

Many of the country’s biggest infrastructure plans were built around the expectation of continued Chinese financing. From new rail lines to expanded highways and energy projects, several proposals depended on concessional loans from Beijing.

If that funding is no longer available, Kenya will have to look elsewhere.

Finding alternative financing may not be easy. Global lenders have become increasingly cautious about debt levels in developing countries. Borrowing from international markets can also be expensive, especially when interest rates are high.

This means Kenya could face a difficult balancing act: repaying existing loans while still trying to invest in development.

If they do not, the cost of those loans may continue to weigh on Kenya’s economy for many years to come.